5 important tax exemptions you can get via the PENJANA plan

This recovery phase we’re in isn’t just for COVID-19, but also the Malaysian economy. Many Malaysians lost their jobs during this period as companies are finding it hard to sustain employees. We’ve written several articles which can be useful for those of you who did, which you can check out below:

[READ MORE: This is the government's plan to keep Malaysian employees from losing their jobs]

[READ MORE: M'sian workers who are fired can now claim unemployment benefits. Here’s how]

A few days ago, the Prime Minister announced the Pelan Jana Semula Ekonomi Negara, or better known as PENJANA, which aims to be an economic recovery plan for the next few months. 

This entire plan will cost RM35 billion, and covers a whole lot of things such as tax exemptions, provide financial aid for companies, employees and job seekers. If you’re concerned about employment matters, click here to read about how you can get help. But for the purposes of this article, we’ll be looking at some of the tax exemptions and reliefs announced—which can somewhat help ease the financial burdens most of us are facing. 

Now, most Malaysians might be familiar with tax reliefs—which you get when you file as income that won’t be taxed because you spent your money on certain types of expenses. But there are also “tax exemptions” in the law—which are basically types of income that you don’t pay tax for—click here to find out more.

Certain tax exemptions and reliefs are given to individuals and companies under this Short-Term Economic Recovery Plan, during the recovery phase. So we chose to feature 5 tax exemptions in this article, which will probably benefit you one way or another:

1. Tax reliefs are given to property owners

If you own property in Malaysia, we have good news for you. The PENJANA plan provides tax deductions to property owners (landlords) who reduce the rental amount to at least 30%. This was previously announced in the Economic Stimulus Package, but the deductions have been extended up to 30^th September 2020. 

Now if you’ve been an avid AskLegal reader, you’d know that we recently wrote an article about how landlords are actually taxed for renting out their property. This is stated under Section 4 of the Income Tax Act 1967:

So if you’re renting out your property and have not been declaring it when you file your taxes, you might want to read the link below:

[READ MORE: M'sian landlords may need to declare tax on rental income. But here's how it works]

If you were thinking of buying your first home this year but COVID-19 happened, there might be some hope that you can still own a property. The PENJANA plan plans to reintroduce the Home Ownership Campaign. The campaign essentially aims to help kick-start the property market post-COVID-19.

The plan offers stamp duty exemptions for home owners. Stamp duty is basically a fee for legal documents, like the instrument of transfer (transfer of strata title to your name) and loan agreement when you buy a house. In other words, it is what you have to pay when you stamp your housing documents.

So the stamp duty exemptions for the instrument of transfer is given to the first RM1 million residential property value. As for legal documents such as the loan agreement, there’s a 100% exemption if the property is priced between RM300,000 to RM2.5 million.

But here’s something to note: The sale and purchase agreement must be drafted between 1^st June to 31^st May 2021. There is also a 10% discount that can be offered by property developers that are part of this campaign. 

2. Local cars are sold with 100% tax exemption

So here’s an opportunity the automotive industry will want to seize before it drifts away. The government has proposed to exempt tax for both local and imported cars. 

Now if you’re wondering who the sales tax exemption will benefit, it’s actually meant for manufacturers who pay a single-stage tax on goods manufactured locally or abroad. But this will also benefit buyers, as the selling price of vehicles will now differ. 

Full sales tax exemptions are given for locally assembled cars, while imported cars will get a 50% sales tax exemption. This tax exemption is effective from 15^th June to 31^st December this year.

BONUS POINT: If you’re a serial online shopper...there’s good news for you, but not your wallet. The PENJANA plan will be introducing “Shop Malaysia Online”, which is a government initiative with several private companies. The initiative will be carried out by providing discounts and promo codes to encourage Malaysians to shop online. 

3. Tourism sectors will not be taxed 

While most sectors have been hit pretty badly by this pandemic, the tourism sector suffered some pretty bad blows as well. In order to get them sailing through rough seas, the PENJANA plan aims to bring the tourism sector to paradise. 

Several tax incentives have been proposed: 

1. Tax extensions until 31^st December has been given to the tourism industry to pay income tax installments. This includes tour agencies, hotels and airlines.
2. Domestic travelers will be relieved from paying income tax up to RM1,000 if they travel between 1^st March to 31^st December 2021. The expenses they are relieved from include accommodation with registered under MOTAC and entrance fee to tourist attractions. 
3. 100% tourism tax exemption will be given starting 1^st July 2020 to 30 June 2021. Eg: You’ll be exempted from paying tax for your accomodation.

If you’ve been waiting to go on that getaway to Pangkor, you might finally be able to using these tax incentives. So if you travel, you can keep the receipts and that amount will be relieved from your tax amount.

Also just a reminder: Practice social distancing while you’re at it. 

4. New businesses will get tax exemptions

Lately, most of our articles on companies and businesses have been pretty bleak due to COVID-19. But we actually have some positivi-tea to spill now, thanks to PENJANA. *bad joke, plis forgive*

To encourage more new businesses post-COVID-19, the government has come up with several tax incentives to help new entrepreneurs. An income tax rebate up to RM20,000/per for the first 3 tax assessment years will be given to SMEs. There’s even a longer period which trails all the way to 31st December next year, for new businesses to register officially and start operating. 

[READ MORE: Which Malaysian business type should you choose for your company?]

Apart from that, there are also stamp duty exemptions given to SMEs, specifically on Mergers and Acquisition documents—that are completed between 1^st July up to 30^th June 2021. 

Now for existing businesses, there are tax deductions given up to RM300,000 if the company proceeds with renovation works and refurbishment. The expenses for the renovation work must be incurred between 1^st March up to 31^st December 2021. 

5. Tax relief is given for COVID-19 related purchases

With the new rules and SOPs established for companies to follow, the PENJANA plan allows for tax deductions for companies that incur costs to buy personal protective equipments (PPE) for their employees, thermal scanners and for conducting COVID-19 tests. 

But if your company issued a notice for you to work from home (WFH), your company is actually entitled to several benefits/incentives for doing so. Tax deductions have been introduced for employers that carry out flexible working arrangements for employees. The tax deduction will be effective from 1^st July 2020. 

If your company has also been generous enough to provide you a laptop, handphone or tablet, there’s an individual income tax exemption up to RM5,000 for you. However, the relief will only be effective starting 1^st July 2020.